Files shed light on more than 20,000 tax haven clients, including relatives of president

Chinese leaders, from left, ex-president Hu Jintao, President Xi Jinping and former premier Wen Jiabao all have family involved in offshore tax havens, leaked files show. Xi in particular has pledged to crack down on corruption among China's elite. (Andy Wong/Associated Press)

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Close relatives of China's top leaders have used secretive offshore companies in tax havens that helped shroud the Communist elite's wealth, according to a massive cache of leaked financial records, posing a formidable challenge for President Xi Jinping, the country's avowed anti-corruption leader.

The confidential files include details of a real estate company co-owned by Xi's brother-in-law, as well as British Virgin Islands corporations set up by former premier Wen Jiabao's son and son-in-law, plus dozens of more cases of people tied to high-level officials.

Li Xiaolin, daughter of former Chinese premier Li Peng, is known as China's 'power queen.' She is tied to two companies in the BVI. (Bobby Yip/Reuters )

The discovery could incense ordinary citizens in China, where senior Communist officials used to enjoy a modestly better living but nothing close to the extravagant wealth required to stash money offshore, said Fred Bild, Canada's ambassador in Beijing from 1990 to 1994. "Now, the income gap between the elite and the masses is huge.... You have hundreds of millions of people that are still living on very low income and they will be outraged."

CBC News has exclusive access in Canada to the files, which show that nearly 22,000 people with addresses in mainland China and Hong Kong are involved in offshore dealings in locales such as the British Virgin Islands and the Cook Islands, places usually associated with hidden wealth. Among them are some of China's most powerful men and women — including at least 15 of China's richest, members of the National People's Congress and executives from state-owned companies entangled in corruption scandals.

"The political families and the elites never assumed that you could have such a public list of names coming out," said Yves Tiberghien, a political science professor at the University of British Columbia and director of its Institute of Asian Research.

Tiberghien compared this latest leak to the classified U.S. intelligence files disclosed by NSA whistleblower Edward Snowden. "There was no assumption that this could come out. So that's the big shock."

Mysteries

The leaked records disclose a wide array of Chinese nationals using offshore havens, often for business purposes tied to the state entities they run, such as for direct foreign investments in Latin America, where Chinese companies have been expanding operations for years. But in many cases, the offshore shell corporations set up by Chinese nationals are shrouded in questions that they refused to answer.

Among China's Politburo Standing Committee, the all-powerful group of seven (formerly nine) men who run the Communist Party and the country, relatives of at least five current or former members have incorporated companies in the Cook Islands or British Virgin Islands, the leaked records show.

UBC professor and Asia expert Yves Tiberghien says President Xi Jinping faces a dilemma over what to do with new revelations about Chinese elites' offshore dealings. (CBC)

The records include details of a BVI company 50 per cent owned by President Xi's brother-in-law Deng Jiagui. Deng is a multimillionaire real estate developer and an investor in metals used in cellphones and other electronics. The records show the other half of Excellence Effort Property Development was owned by yet another BVI company belonging to Li Wa and Li Xiaoping, property tycoons who made news in July by winning a $2.2-billion bid to purchase commercial real estate in Shenzhen.

The files also reveal that former premier Wen's son Wen Yunsong set up a BVI-registered company, Trend Gold Consultants, with help from the Hong Kong office of Credit Suisse in 2006. Wen Yunsong was the lone director and shareholder of the firm, which appears to have been dissolved in 2008.

It isn't immediately clear from the documents what Trend Gold Consultants was used for. A U.S.-educated venture capitalist, Wen Yunsong co-founded a China-focused private equity firm and in 2012 became chairman of China's Satellite Communications Co., a state-owned firm that aspires to be Asia's largest satellite operator.

Reporters made repeated attempts to reach him and other individuals. Only a few responded. Wen was among those who did not.

Among the other important Chinese who went offshore:

Fu Liang, the son of Peng Zhen, one of the "Eight Elders" of the Communist Party and a top leader of the National People's Congress in the 1980s. The leaked offshore records show Fu controlled at least five offshore companies established in the BVI between 1997 and 2000. He used one of them to acquire a Philippines hotel in 2000.

Yang Huiyan, China's richest woman, with an estimated net worth of $9 billion. She established a BVI company in 2006 with the help of UBS Hong Kong. Yang, who inherited a real estate fortune from her father, did not respond to questions about her offshore dealings.

Zhang Xin, real-estate billionaire and founder of Soho China, a company that has reshaped much of the Beijing skyline. Through a representative, Zhang declined to answer questions about her BVI company.

Former PetroChina executive Li Hualin, who was dismissed in August after coming under investigation for alleged "serious violations of discipline" — often a Communist Party shorthand for corruption. Li was the director of two BVI companies, the leaked files reveal.

Challenge for Xi

Chinese officials aren't required to disclose their assets publicly and until now citizens have remained largely in the dark about the parallel economy that can allow the powerful and well-connected to avoid taxes and keep their dealings secret. By some estimates, between $1 trillion and $4 trillion in untraced assets have left the country since 2000. A People's Bank of China report in 2011 found that public officials alone had embezzled more than $120 billion out of China since the mid-1980s, some of it funnelled through the BVI.

"There never used to be that kind of money floating around in the past," former ambassador Bild said.

"People at the very least will start demanding controls over what the leaders can do — over what the directors and these other people who run these enterprises can get paid. And they will ask for controls on placing fortunes abroad, on using tax havens."

Caribbean haven

The British Virgin Islands, or BVI as they're known, are a U.K. territory with a population of fewer than 30,000. Strong financial secrecy laws and zero income tax on international companies make the BVI a favourite place to incorporate offshore. More than 450,000 corporations have their home here, including 6,000 involving mainland Chinese residents and nearly 12,000 involving people from Hong Kong.

It's a politically sensitive issue for China as the country's economy cools and its wealth gap continues to widen. The country's leadership has cracked down on journalists who have exposed the hidden wealth of top officials and their families as well as citizens who have demanded that government officials disclose their personal assets.

In November, a mainland Chinese news organization that was working with the International Consortium of Investigative Journalists to analyze the latest raft of offshore data backed out, explaining that authorities had warned it not to publish anything about the material.

But at the same time, Xi, since taking over as the Communist Party's top official in 2012, has sought to burnish his image with an aggressive anti-graft campaign, promising to go after official corruption involving both low-level "flies" and high-level "tigers."

Tiberghien said the latest revelations will test the honesty of those efforts.

"Xi actually has emphasized the fact that this inequality of wealth, the corruption, the abuse of power were very, very deleterious for the system and is cracking down on them, so to some extent it helps him," he said.

"But it's a delicate game, because to some extent if you go too far, you can threaten the legitimacy of the party itself. It's very damaging; it's very vivid information. There will be an effort by the propaganda to probably limit the spread of [this] information."

If you have more information on this story, or other investigative tips, please email investigations@cbc.ca.

China: Who uses offshore tax havens?

A massive leak of financial records reveals thousands of Chinese are involved in tax havens, among them relatives of the country’s top leaders and some of China’s wealthiest people. Click on their pictures below to explore their links to power and to the offshore economy.

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